The group has already issued two profit warnings and in less than a week Martell will have to announce the first loss in St Ives’ 25-year history.
To make matters worse, the group has a big overdraft and pension deficit and is facing structural decline in one of its largest markets: magazines. By the time the results came out in October, revealing a pre-tax loss of £7.2m, St Ives had announced the closure of its Crayford and Andover plants, as well as job cuts at its Plymouth site. The restructure of the UK’s flagship print PLC had begun.
Looking back, it’s easy to forget just how bad things were at the height of the global financial crisis. St Ives chairman at that time, Miles Emley, described 2009 as "the toughest in the history of St Ives as a public company". Recalling the hectic period following his appointment in an interview last week, Martell said: "The priority at that point became very straightforward: ensure the survival of the business if the banks stopped lending entirely."
That doomsday scenario, unthinkable prior to 2008, was now somewhere between possible and probable, so the new board decided to focus on cash generation as a means to finance the restructure. That was phase one; phase two would lead to one of the most significant watersheds in the group’s history.
"We identified a number of markets where we were generating cash but the long-term characteristics were for permanent decline," says Martell. "The options then are manage the business for cash or sell it for a value that reflected its future cashflows."
The value St Ives settled on for the disposal of its magazine printing arm, St Ives Web, was £20m. Martell refers to the sale, to Walstead, owner of rival web offset group Wyndeham, as a "watershed moment". "It was a class-one disposal that needed shareholder support, it involved a significant write-off and it was the market around which St Ives was founded." This was a decision devoid of sentiment and focused firmly on market reality – in many ways the hallmark of Martell’s leadership.
More disposals followed as the new board stuck to its task of sorting out the businesses that either weren’t generating cash or were facing structural decline. Four years on, the list has grown to include: Edenbridge, Sevenoaks, Blackburn, Westerham Press, Leeds and, as of 30 September 2013, St Ives Direct Bradford – the last of the print businesses that don’t fit with the new look. This has left Clays, SP Group and Service Graphics, all of which have a high degree of service associated with them rather than just differentiating themselves through the quality of their print, which post-2009 was no longer an option.
"Printing expertise has been devalued because of technology; it’s easier now to be an expert printer than it ever used to be, and so printing in the main is seen as just hygiene," says Martell. "If you went to some of our bigger customers and said we’ll print for you and it will be good quality and we’ll deliver on time, they’d just laugh and ask ‘so what?’ ‘Yes of course you will, but what will do for me?’"
This was the question St Ives set out to answer when it began looking for complementary markets to invest in. Although this has led the group into new territory as a provider of services rather than printed products, Martell has played to St Ives’ strengths by investing in "the execution of marketing services", which at its core is about "the complex execution of projects to tight timescales"; familiar territory for any printer.
St Ives now owns seven companies operating in four areas of marketing services. The changing shape of the group is mirrored in the make-up of the current board, of which Martell is the only one from a print background, and in a fundamental shift in culture "from being a group employing 5,000 people involved in print to one where the majority of the group’s operating profit will, within three years, come from marketing services, not print".
Martell, who in that first interview in 2009 said his focus was "to try and manage the business as best I can, not to mess with things I can’t control [and to] try and deliver value to our shareholders", admits that the path he chose was "much more disruptive" than trying to reinvent St Ives by smaller steps. But equally, it has been quicker and the financial results point to the success of his strategy, as does the ultimate yardstick – the share price, which on the day Martell took over in April 2009 closed at 61p.
Today St Ives shares trade at £1.71, the overdraft is gone and the pension fund is running at a small surplus. How’s that for delivering value?
